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San Francisco Chronicle​

Home values in this hypercompetitive part of the Bay Area are starting to dip

For the past two years, Silicon Valley home values have soared to record highs, with one of the country's most expensive housing markets becoming even more so. But recently, that trend has begun to curve downward. The typical home value in Santa Clara County dipped from about $1.72 million in November to $1.69 million in May, according to data from real estate company Zillow. That 2% decline is nowhere near enough to erase the nearly 40% increase in the county's home values since 2020, and other California counties have seen home values fall even further in the past six months. But the shift underscores how the cooling U.S. housing market is affecting even hypercompetitive regions such as the Bay Area. A booming tech industry, and particularly optimism around artificial intelligence, led to a significant increase in Silicon Valley home values over the past five years, with many tech workers making offers far above sellers' asking prices. But President Donald Trump's economic policies rattled the stock market and consumer confidence earlier this year, causing some homebuyers across the U.S. to withdraw, especially as interest rates remain high. That doesn't mean home values are in free fall or that homes are suddenly affordable for many Bay Area residents. But it does mean some sellers are having to whittle down their prices to strike a deal. What's happening in the South Bay is also occurring across California: More homes are for sale, but demand hasn't kept up, making bidding wars less fierce. About 7,000 homes in Santa Clara County were put on the market from January to May this year, about 4% more than the same period last year, according to data from real estate brokerage Redfin. But the number of pending sales has dipped slightly. The Silicon Valley housing market is still one of the hottest in the Bay Area. Redfin data shows homes in Santa Clara and San Mateo counties still sell in a median of two weeks, and most homes sell above asking price. Zillow's estimates from earlier this year even seemed to indicate that home values in the region's most expensive neighborhoods would remain immune from the economic volatility that rippled through other markets. 'If you're in a really good ZIP code or if the home is marketed in the right way, a buyer will still (want to) get it,' said Nikki Edwards, a Realtor with Silicon Valley-based EQ1 Real Estate. But some sellers who hoped to earn top dollar are now finding they may need to scale back expectations. Buyers are now competing with two or three other offers instead of 15 or 20, Edwards said. Because of that, sellers 'can't be overly aggressive on price.' The Bay Area saw a 'very big increase' in price cuts during spring, as has much of the U.S., said Patrick Carlisle, chief market analyst at Compass. The number of Bay Area listings with price reductions reached its highest May level in at least five years last month, he added. It's not just the Bay Area's tech hubs that are seeing home values start to level out. Contra Costa and Marin counties have also seen their values dip, while growth has flattened in much of the rest of the state.